Kenya’s bilateral arrangement to import fuel from three-State owned Gulf firms faces a critical test again as the United States, Israel and Iran battle, threatening both oil prices and its supply. The potential for a wider and sustained war across the Middle East is set to weigh on the resilience of the country’s oil import plan, even as the Ministry of Energy and Petroleum assures of the security of supply through the month of April.The closure of the Strait of Hormuz, a narrow waterway in the Middle East that supports the export of a third of the world’s seaborne oil and gas, risks stopping oil supplies to Kenya despite bilateral assurances under the government to government (G-to-G). The deal with Saudi Aramco, Emirates National Oil Co. and Abu Dhabi National Oil Co. was crafted to guarantee availability of supply and fix other costs outside of the spot market price of oil like freight and insurance costs.The fears of the abandonment of existing contracts over the raging war have been realised with QatarEnergy declaring force majeure this week, a note that unforeseeable circumstances have prevented the fulfilment of contracts for liquified natural gas (LNG) supplies, after suspending production at key export facilities.The declaration has sent shockwaves through energy markets which have already been rocked by the escalating profit. The government-to-government deal held firm through 12 days of conflict between Israel and Iran in June last year, but disruptions on the Strait of Hormuz were limited.Kenya is hoping that its arrangement on oil imports will hold through the war, even as the prospects of a longer running conflict remain on the table. “The existing suppliers have confirmed to us that they’ll be able to meet and honour their obligations, and this is one of the benefits of entering into an arrangement with Stateowned entities,” said Daniel Kiptoo, the Director General of the Energy and Petroleum Regulatory Authority.“We have seen other commercial entities declare force majeure. We’ve seen other companies walk away from obligations they have, but because of the solid relationship that we have at both bilateral level and at State-toState level, they are not likely to walk away from those obligations.” Saudi Aramco, Emirates National Oil Co. and Abu Dhabi National Oil Co supply Kenya with petrol, diesel and kerosene consignments on a 180- day credit plan which is meant to ease pressure on forex reserves and support the shilling.Oil marketing companies pay for the supplies of fuel in Kenya shillings to receiving banks, which then use the credit window to source for dollars from the market to meet payments. The G-to-G arrangement does not cushion against price movements which are set at the spot market, leaving Kenya exposed to higher oil prices which could impact on inflation and fuel costs in coming months.The price per litre of petrol and diesel in Nairobi currently stands at Sh178.28 and Sh166.54. Murban crude prices have jumped by more than 24.3 percent to over $92 (Sh11,886) per barrel, since targeted bombings by US and Israel on Iran from Saturday last week. The higher prices will however not reflect immediately on pump prices in Epra’s fuel cost review on March 14 as shipments for the next pricing cycle happened before the start of the war.Future cycles could however see higher prices depended on the extension of the war and closure of the Strait of Hormuz resulting in the government falling back on subsidies to stabilise domestic pump prices. Kenya extended the G-to-G oil import deal for a further two years in April 2025 implying that fuel shipments under the deal continue into 2027. (ICE NAIROBI)

Fonte notizia: Business Daily